Value-added tax (VAT)
VAT is chargeable on all taxable goods and services supplied in, or imported into, the United Republic of Tanzania. The standard rate of VAT is 18% in Mainland Tanzania and 15% in Tanzania Zanzibar except for banking, postal and telecommunication services where an 18% rate is applicable. Additionally, the export of goods and certain services is eligible for zero rating. Generally, businesses with or expecting to generate an annual taxable turnover of more than TZS 200 million in Mainland Tanzania and TZS 100 million in Tanzania Zanzibar must register for VAT. The Commissioner has the discretion to register (as intending traders) investors whose projects have not commenced production of taxable supplies but wish to be VAT-registered in order to reclaim the tax they incur on start-up costs. A business that only makes exempt supplies is unable to register for VAT and, consequently, unable to recover the VAT incurred on inputs.
Registered businesses must submit VAT returns, and pay any tax due, monthly.
There is also mandatory registration for professional service providers (e.g. lawyers and accountants) and government entities/institutions carrying out economic activities. A non-resident who carries on an economic activity in Mainland Tanzania without a fixed place (e.g. non-resident suppliers of B2C electronic services) and makes taxable supplies in excess of the VAT registration threshold (no threshold for non-resident suppliers of B2C electronic services) is required to appoint a VAT representative unless it is impractical to do so due to business circumstances, in which case the non-resident would be required to apply for a simplified registration in accordance with procedures prescribed in regulations.
For imported goods, VAT is payable at the time of importation together with any customs and excise duties. VAT payable with respect to specific capital goods (as defined) may be deferred, subject to certain procedures being followed. However, VAT deferment on imported capital goods will cease to apply from 30 June 2026.
For imported services, VAT is accounted for by registered businesses through a 'reverse-charge' mechanism, and such accounting is only relevant where a taxpayer has exempt supplies of 10% or more of the total supplies.
Depending on the industry, there are a number of exempt supplies. These include (this list is not exhaustive):
- Agricultural implements, agricultural inputs, livestock, basic agricultural products and food for human consumption; implements for fisheries; bee-keeping implements; dairy equipment; and medicine or pharmaceutical products.
- Import of food, clothing, and shoes donated to non-profit organisations for free distribution to orphanages or schools for children with special needs in Mainland Tanzania.
- Goods imported by non-profit organisations for the provision of emergency and disaster relief (conditional).
- Goods imported by religious organisations for the provision of health, education, water, and religious services (conditional).
- Educational services provided by a relevant approved educational institution; education materials.
- Import of laboratory equipment and reagents by a registered educational institution to be used solely for educational purposes.
- Goods eligible for relief under the East African Customs Management Act (where imported by a registered and licensed explorer or prospector for exclusive use in oil, gas, or mineral exploration or prospecting activities).
- Various goods imported by a natural gas distributor (including compressed natural gas [CNG] plants equipment, natural gas pipes, transportation and distribution pipes, CNG storage cascades, CNG special transportation vehicles, natural gas metering equipment, CNG refuelling of filling, gas receiving units, flare gas system, condensate tanks and leading facility, system piping and pipe rack, and condensate stabiliser).
- Healthcare, medicine, or pharmaceuticals products, including food supplements or vitamins supplied to the government; articles designed for people with special needs; funeral services.
- Fire-fighting vehicles imported by the government and fire-fighting equipment.
- Sale of vacant land.
- Lease, license, hire, or other form of supply, to the extent that it is a supply of the right to occupy and reside in residential premises.
- Water (except bottled or canned water or similarly presented water).
- Supply of solar panels, modules, solar charger controllers, solar inverters, vacuum tube solar collectors, and solar batteries.
- Unprocessed edible vegetables.
- Insurance for health, life, aircraft, workers compensation, crop agriculture, and livestock farming.
- Gaming supply.
- Specified petroleum products.
- Pasteurised and unpasteurised goat and cow milk.
- The transportation of person by any means of conveyance other than taxi cabs, rental cars or boat charters.
- Importation of arms and ammunition, parts and accessories thereof, equipment and machineries for the official use of the armed forces as certified by the Ministry responsible for security and defence.
- Supply of air charter services up to 30 June 2026.
- A supply of sisal ropes of HS Code 5607.21.00 and 5607.29.00
- A supply of locally manufactured sisal bags of HS Code 6305.90.00
- Supply of aircraft lubricants of HS Codes 2710.19.51, 2710.19.52, 3403.19.00, and 3403.99.00 to a local operator of air transportation.
- Imported refrigerated containers of HS Code 8418.69.90 by a person engaged in horticulture for exclusive use in horticulture.
- Imported grain drying equipment of HS Code 8419.34.00 by a person engaged in agriculture for exclusive use in agriculture.
- Importation of aircraft lubricants, airline tickets, brochures leaflets, calendars, diaries, headed papers, and airline uniforms engraved or printed or marked with airline logo and imported under a Bilateral Air Services Agreement between the Government of United Republic of Tanzania and a foreign government.
- Import of precious minerals, tin, tungsten, tantalum, mineral concentrates, and loaded carbon by any person for processing, smelting, refining, or sale in the Mineral and Gem Houses or buying stations designated by the Mining Commission.
- Import of contactless smart cards and consumables of HS Code 8523.52.00 by the National Identification Authority.
- An import of cold rooms of HS Code 9406.10.20, 9406.20.20, 9406.90.20 and refrigerated truck of HS Codes 8704.21.90; 8704.22.90, 8704.23.90, 8704.31.90, 8704.32.90, 8704.90.90 by a person engaged in livestock, fishery or agriculture duly certified by the Ministry responsible for livestock, fishery or agriculture.
- Import of artificial grass of HS Codes 5703.21.00, 5703.29.00, 5703.31.00 and 5703.39.00 for football pitches located in a City or Municipal Council approved by the National Sports Council of Tanzania.
The VAT Act contains restrictions on claiming of input tax. For example, one cannot claim VAT incurred on entertainment; membership to sporting, social, or recreational clubs or associations; and spare parts and repair or maintenance costs in respect of passenger vehicles.
The input tax claim time limit is six months. However, this time limit starts to run by reference to the date of the fiscal receipt.
Input tax incurred on goods in the six months prior to VAT registration can be claimed no later than in the third VAT return submitted following registration.
A company with taxable supplies of more than 90% of total supplies is entitled to full input tax credit while a company with taxable supplies less than 10% of total supplies is not entitled to claim any input tax incurred.
A company with taxable supplies between 10% and 90% of total supplies is entitled to partial input tax recovery. Two methods of apportionment, namely the average method and direct attribution method, can be used. Imported services are not taken into account as supplies when determining the allowance of input tax for partial exemption purposes.
Businesses entitled to VAT refunds can claim any remaining credit six months after the refund first became due, subject to all intervening returns being rendered. Any claim for a VAT refund must be supported by an auditor's certificate of genuineness. Businesses in a consistent refund position (e.g. exporters) may apply for approval to lodge their refund claims monthly.
The VAT Act includes specific requirements to be met by a fiscal receipt to facilitate a refund claim. This includes claims made by diplomats and international organisations. A fiscal receipt is defined to include receipt issued by a fiscal device, by the Government Electronic Payment Gateway and any other electronic system approved by the Commissioner General.
VAT in Tanzania Zanzibar is administered under a separate but similar legislation.
Digital service tax
A non-resident involved in digital transactions (i.e. providing electronic services) is required to account for tax of 2% on the turnover (excluding VAT). The Regulations (Income Tax (Registration of Non-Resident Electronic Service Suppliers) Regulations, 2022) provide for procedures to be followed by non-residents providing electronic services, covering matters including scope of services, registration (online), filing simplified income tax returns (online), and payment requirements.
There is a monthly filing requirement of digital service tax returns to be done by the 20th of the month following the month to which the payment relates.
Tanzania is a member of the East African Community, which became a Customs Union on 1 January 2005 on the implementation of the East African Customs Union Protocol. This protocol provides for a common external tariff (CET), elimination of internal tariffs, rules of origin, anti-dumping measures, a common customs law, and common export promotion schemes.
Generally, the import duty rates applicable under the CET are as follows:
|Raw materials, capital goods, agricultural inputs, pure-bred animals, medicines||0|
|Finished consumer goods||25|
|Machinery and spare parts imported by licensed mining companies and used in mining activities||0|
|Machinery and inputs (excluding motor vehicles) imported by a licensed company for direct and exclusive use in oil, gas, or geothermal exploration, development, and distribution upon approval by the competent authority||0|
Goods originating in Southern Africa Developing Countries (SADC) or the East African Community (EAC) have preferential or nil customs duty rates, subject to meeting the Rules of Origin Criteria. Most imports are also subject to Railways Development Levy of 1.5% (except goods that are exempted from import duty, pharmaceutical goods, fertilizers as defined in the EAC Common External Tariff, and kerosene type jet A1 fuel classified under HS Code 2710.19.21) and Destination Inspection Fee of 0.6% of the FOB value.
Excise duty rates apply on a specific or ad valorem basis as follows (this list is not exhaustive and exceptions may apply in some cases):
|Item||Rate for FY 2023/24 (TZS)|
|Fruit juices (including grape must) and vegetable juices, unfermented and not containing added spirit, whether or not containing added sugar or other sweetening matter||9.9 per litre/255.2 per litre|
|Imported powdered juice||255.2 per litre|
|Waters, including natural or artificial mineral waters and aerated waters, not containing added sugar or other sweetening matter or flavoured; ice and snow||63.8 per litre/70.4 per litre|
|Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured, and other non-alcoholic beverages, not including fruit or vegetable juices of heading 20.09||67.1 per litre|
|Non-alcoholic beer||673.2 per litre/706.86 per litre|
|Imported powdered beer||1012.8 per litre|
|Beer made from malt||620 per litre/ 918 per litre/963.9 per litre|
|Beer made from 100% local unmalted cereals||540 per litre|
|Wine with more than 25% imported grapes; cider||5,600 per litre|
|Wine with domestic grapes, banana, tomato, rosella content exceeding 75%||200 per litre|
|Spirits, vodka, and whiskies||540 per litre/3,978 per litre/4,386.06 per litre|
|Cigarettes without filter containing more than 75% domestic tobacco||14,936.4 per mil|
|Cigarettes with filter containing more than 75% domestic tobacco||35,310 per mil|
|Other cigarettes not mentioned above||67,076.1 per mil|
|Cut rag/filler (imported)||33,878.88 per kg|
|Cut rag/filler (locally produced containing more than 75% domestic tobacco)||9,600 per kg|
|Motor spirit (gasoline) premium||339 per litre|
|Motor spirit (gasoline) regular||379 per litre|
|Gas oil (diesel)||255 per litre|
|Kerosene type jet fuel||Nil|
|Illuminating kerosene||465 per litre|
|Industrial diesel oil||392 per litre|
|Heavy furnace oil||0 per litre|
|Lubrication oil (containing petroleum oils or oils obtained from bituminous minerals)||735.9 per m³|
|Other lubrication oils||735.9 per m³|
|Lubrication greases||0.87 per kg|
|Music and film products||55 per unit|
|Cement||20 per kg|
|Item||Rate for FY 2023/24 (%)|
|Satellite, terrestrial infrastructure, cable television broadcasting or other technology||5|
|Electronic communication services||17|
|Charges or fees by a telecommunication service provider or other payment system provider licensed under the National Payment Systems Act for money transfer and payment service||10|
|Charges or fees by a financial institution for services provided by such institution||10|
|Disposable plastic bags||50|
|Liquefied petroleum gas (LPG)||0|
|Motor vehicle with cylinder capacity exceeding 1,000cc but not exceeding 2,000cc||5|
|Motor vehicle with cylinder capacity greater than 2,000cc||10|
|Old motorcycles (more than three years)||10|
|Old passenger motor vehicles (more than five years)||10|
|Old motor vehicles (eight years but not more than ten years)||15|
|Old motor vehicles (more than ten years)||30|
|Imported used spare parts (for vehicles, motorcycles, domestic and electrical appliances)||25|
|Imported furniture (per unit)||20|
|Aircraft (including helicopters, aeroplanes) but excluding commercial aircraft, yachts, and other vessels for pleasure or sport||20|
Fuel levy is charged on petroleum and diesel at a rate of TZS 513 per litre.
Petroleum levy is charged on petroleum, diesel, and kerosene at TZS 100 per litre.
Examples of instruments giving rise to stamp duty obligations include conveyances, leases, share transfers, and issue and transfer of debentures. For most of these instruments, the applicable stamp duty rate is 1% of the consideration.
Railways Development Levy (RDL)
RDL applies at the rate of 1.5% of the cost, insurance, and freight (CIF) value of goods entered for home consumption. The levy is not applicable to imported goods that have relief or exemption under the East African Community Customs Management Act 2004 (EACCMA 2004), pharmaceutical goods, etc.
Payroll taxes and social security contribution
Apart from individual income tax (deducted at source by the employer), payroll taxes include:
- Skills and development levy at 3.5% of payroll cash costs. This applies to every employer who has ten or more employees.
- Employers who are not obliged to pay SDL are not required to file SDL returns
- 20% social security contribution, which is normally split equally between employer and employee (i.e. 10% each)
- Workers compensation fund tariff charged at 0.5% of cash sums paid to employees. The tariff is payable on a monthly basis.
Under the gaming tax, gaming activities are taxed at a maximum of 25% and gaming prize winners are taxed at a maximum of 15% on the amount or value of the winnings.
The TRA levies a property tax based on the value of a premises. The rates vary depending on the value and location of the property. For unvalued properties, TZS 18,000 is payable for a normal building and TZS 90,000 per storey for a storey building.
The Local Government Authorities are entitled to charge upto a maximum of 0.3% service levy based on turnover generated by corporate bodies in the relevant district.
Produce cess is capped at 3% on food and cash crops and 5% on forest products such as timber, charcoal, and logs. However, there is an exemption on the transportation of crops of less than one tonne from one district to another.